Budget and tax system spending

In looking for budget cuts, lawmakers have to look at all of the deductions, exclusions and tax credits in the tax system. As Mr. Simpson and Mr. Bowles, co-chairs of President Obama's Deficit Commission that issued a report in 2010, say - these represent about $1.1 trillion of annual spending. That amount is about the same as the amount of discretionary spending in the federal budget - it's a lot of money. I'm talking about, for example, the roughly $95 billion cost for allowing less than 1/3 of mostly high income individuals to have a reduced tax bill because of their mortgage interest deduction on their main home or perhaps also a vacation home and perhaps even a home equity debt.  It includes over $110 billion for the approximately 60% of employees whose employer covers all or part of their health insurance cost which is not considered compensation to them.

Well, on March 5, the Senate Budget Committee held a hearing on this spending - Reducing the Deficit by Eliminating Wasteful Spending in the Tax Code. Chairwoman Patty Murray noted in her opening remarks:

"Over the next few weeks, both chambers of Congress will be debating fundamental choices about our country’s direction, and what kind of nation we will leave to our next generation. We will lay out proposals that reflect very different approaches to the many challenges we face. One central question we’ll be looking at is how can we bring down our debt and deficits, while putting the middle class and broad-based economic growth first? Today’s hearing will focus on how cutting wasteful spending from our tax code can help us meet this challenge."

Not all tax expenditures are wasteful spending, but most can likely be improved to better aim at their intended purpose. Some, such as a mortgage interest deduction on a vacation home, should be phased out.  Doing so can help the income tax system be more equitable and transparent.  If enough tax expenditures are eliminated or reduced, lower rates and deficit reduction are possible.

For a list of the tax expenditures and their cost, see the annual Joint Committee on Taxation report.

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Budget and tax system spending 2013-03-12T10:57:00-07:00 Rating: 4.5 Diposkan Oleh: Unknown